Sweetgreen and Kura Sushi USA are the latest restaurant chains to return relief funds they received from the now depleted Paycheck Protection Program, which was designed to help small businesses impacted by the COVID-19 pandemic.
The $349 billion PPP loans were part of the $2 trillion Coronavirus Aid, Relief and Economic Security, or CARES Act. Last week the funds dried up, leaving many independent restaurants without funding. Today, the House is expected to approve an additional $310 billion to replenish the program.
Last week, chains like Shake Shack and Ruth’s Chris Hospitality came under fire for receiving funds. Nation’s Restaurant News was among the first national publications to point out that Shake Shack cut 1,000 employees a week after receiving $10 million in PPP funding.
The PPP loan is forgivable if companies use 75% of the funds on payroll costs. Late Sunday, Shake Shack leaders Danny Meyer and Randy Garutti announced in an open letter that the New York City-based chain was returning its PPP funds because other restaurants “who need it most, haven’t gotten any assistance.”
Sweetgreen founders Nathaniel Ru, Jonathan Neman and Nicolas Jammet provided the same reason for returning funds, which they announced April 22 in a joint letter posted on Medium.
“At the end of last week, we were approved for a $10M loan through the program,” the founders wrote. “That same day, we learned that the money had run out and so many small businesses and friends in the industry who needed it most did not receive any funds. Knowing that, we quickly made the decision to return the loan.”
Sweetgreen, which has about 90 locations, said it was going to use 100% of the loan “to pay the people in our restaurants and hire back furloughed team members faster.”
The privately held company declined to comment when asked how many employees had been furloughed during the crisis.
Kura Sushi, which operates a string of sushi bars across the U.S., said it was returning $5.98 million in PPP funds because their finances are in better shape compared to other restaurants. The company has furloughed about 35% of its workforce, and has temporarily closed all 25 of its restaurants
“This was a difficult decision because our employees are extremely important to us, but it’s impossible to ignore the fact that our finances allow us to weather financial hardship for a longer period than independent restaurant owners,” Jimmy Uba, president and CEO, wrote in a letter posted on the company’s website. “We hope that these funds will be shared equitably among deserving candidates.”
Other chains that have received PPP loans include Ruth’s Chris Hospitality ($20 million), Fogo de Chao ($20 million); Potbelly Corp. ($10 million); Pollo Tropical and Taco Cabana parent Fiesta Restaurant Group Inc. ($10 million); J. Alexander’s Holdings Inc. ($15 million split between J. Alexander’s LLC and Stoney River Management Company LLC); Rave Restaurant Group ($656,830) and Wendy's franchisee Meritage Hospitality Group Inc. ($29.1 million.)
The COVID-19 pandemic has had catastrophic impacts on the restaurant industry due to shelter-at-home mandates.
On Monday, the National Restaurant Association asked Congress for a $240 billion recovery fund for the restaurant industry, which has seen 8 million workers lose jobs since mid-March. The industry is on track to lose about $80 billion in revenue by the end of April with industry-wide losses pegged at $240 billion through the end of 2020. Those losses assume a gradual reopening of the economy in June.
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